Everything about Gold ETFs

Last Updated: 14 Oct 2024

Besides being a symbol of love and a gift commemorating weddings, gold is regarded as the safest asset in India. Homeowners purchase gold to counter uncertain and unpredictable situations in life. However, buying physical gold might be complex because you need to keep them in a secure place. On that note, Gold Exchange Traded Fund or Gold ETF becomes a viable choice. Let’s explore more about Gold ETFs in this post.

An Introduction to Gold ETFs

So, what are gold ETFs? Gold ETFs are units representing the physical gold bought in the dematerialized form. They can track the pricing of domestic physical gold and are traded like a company stock on NSE/BSE.

Even in the recession, selling or investing in gold has continued in India. The government has offered Gold ETFs, the units that represent physical gold. These ETFs can track the domestic physical gold price. They are traded and listed like any company stock. Investing in gold ETFs does not mean you have physical gold. But you have cash equivalent to the price of the gold.

Someone who invests in gold ETFs does not own gold physically. But they hold the cash that’s equal to the gold price. If the investor plans to sell the gold ETFs, they do not get physical gold. However, they receive cash that’s equivalent to the gold price.

These units can be purchased via open-funded mutual funds. The money is collected via Gold ETF units, which are usually invested in gold. Through these Exchange Traded Funds, one may invest in Gold stock ETFs and Gold price Exchange Traded Funds.

These ETFs are associated with firms operating in gold mining and other activities. Gold price ETFs allow these businesses to invest in companies that deal in the Gold price index.

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Advantage of Investing in Gold ETFs: Unlocking Some Key Features

The following are the key features and benefits of Gold ETFs

Get Immense Flexibility

One can invest in Gold ETFs online and place them in the Demat account. An AMC or asset management company trades them on the stock exchange. So it means the investor can easily exit or enter when and if required. It does not matter whether you place the fund in the Demat format. These ETFs will behave in the same way as physical gold.

Participating in the Gold Market Quite Easily

Investors get exposure to the recent gold market, which is a profitable and transparent platform. With Gold Exchange Traded Funds, investors can acquire significant liquidity because tracing gold is a hassle-free process.

Advantages of Making the Decision

When a customer approaches a retailer for gold purchases, it usually involves a large amount of money. But when it comes to gold ETFs, one can decide on the quantum that they desire to sell or buy. So, it offers the investor a competitive advantage in making the decision.

Easy to hold for long

The best part of investing in gold ETFs is that they do not levy wealth tax when compared to physical gold. Safety and storage in the Demat account are no issues. So, one can keep the ETFs for a longer span of time.

Higher Liquidity

Gold ETFs provide investors with high liquidity because they can be traded in the stock exchange during trading. The transactional expenses (including the broker fee & government duty) are less than physical gold.

Tax-Efficiency

Gold ETFs provide you with a tax-friendly mode to hold gold because the returns are subject to a long-term capital gain tax. But fortunately, there are no hassles associated with the burden of sales tax, wealth tax, and VAT.

Using NSE or National Stock Exchange Platform

Gold ETFs can also use NSE, a stock exchange platform that keeps trade and transactions transparent.

No Need to Rent a Bank Locker to Keep Physical Gold Safe

Gold ETF units that are issued to an investor will be linked to their credentials. So, they are not stolen, unlike the physical gold that people need to keep in the bank locker and pay for the locker.

Ease and Convenience of Transaction

Another benefit of gold ETF units is that they can be used as security for any secured loan. Note that the transactions during this case are seamless and straightforward, with zero exit or entry load.

Extremely Affordable: Buy Them At International Rates

Unlike physical gold, ETF units don’t attract making charges. Truth be told, you don’t need to create any bar or ornament out of these units. All you need is simply buy it at international rates.

What To Learn About Buying and Selling ETF Investments?

After learning the advantages of gold ETFs, it is time to discover things about buying and selling ETF investments. The truth is you can buy or sell Gold ETFs for a minimum of one unit on NSE or BSE with your Demat account.

But if you do not have a Demat account, you can still invest in Gold ETFs via the Gold Fund of Funds. This type of offering allows investors to invest in the yellow metal via SIP/lump sum.

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Signing Off

So, this post compiles the meaning of gold ETFs, their benefits, and investments. In short, Gold ETF is the most efficient method to get exposure to physical gold without thinking of a storage option. Holding Gold ETF offers a hedge against volatility and inflation in other assets.

As an investor, if your portfolio comprises gold ETFs, you can gain from capital appreciation. Today, these investments have emerged as a cost-effective and simple investment opportunity to gain exposure to gold. So, when are you planning to invest in a Gold Exchange Traded Fund?